My friend and colleague, David Hutchison, and I were comparing notes about Schlumberger’s spin-offs this year – OneStim, WIS.  The management of SLB told the world last year that everything tied to US land or shale is under review.  They were serious.  In fact, we think we are seeing a company taking bold, aggressive steps to only work on the world’s hardest, most technically challenging, expensive wells – and those would be offshore and international.  And if that is the case, what US business in the Schlumberger portfolio goes next?

After spinning off OneStim, SLB’s $24 billion in global revenues in 2020 are distributed as follows:

As this chart shows, about $6 billion of Schlumberger’s revenue this year will come from North American operations and about half of that will be tied to offshore and capital equipment – which are product lines that Schlumberger is most inclined to keep.  So where will Schlumberger’s US shale-focused business units go, given that the company has already partnered with Liberty for frac and exited rental and fishing this year?

Here below are the two existing deals, plus our guesses, and these guesses make the following assumption:  

SLB is inclined to sell a US business unit to a market leading competitor in exchange for a piece of that competitor (e.g. Liberty + OneStim).

SLB Rental/Fishing…already divested to form WIS

SLB Frac…being merged with Liberty Oilfield Services

SLB Cement…combine with the former BJ cementing, NINE or the reconstituted Sanjel

SLB Directional…combine with Scientific Drilling, PHX, or Patterson-UTI

SLB Drilling Fluids/Solids Control…become strictly a wholesaler through their Federal entity

SLB Coiled Tubing…combine with Nextier, STEP or KLX, primarily for the large diameter units

SLB Lift…spin off rod lift, keep ESP and gas lift

Hutchison’s ‘aha moment’ was this, however:  If SLB sells directional, what happens to bits?  Smith Bits has done extremely well within Schlumberger, largely because SLB directional and SLB bits work very closely to provide an integrated product offering.  Since launching this initiative, SLB has surged into first place in the global drill bit market.  Does this leave Smith Bits high and dry in the US shale plays?

So place your bets.  Let’s see how well we do with our guesses.

To prepare this essay we relied on the following Spears’ reports:  Oilfield Market Report, Cementing Report, Hydraulic Fracturing Report, Directional Drilling Report, Well Servicing & Coiled Tubing Report, Drill Bit Report.  We publish 10,000 pages of unique research each year for our subscribers.  In the Q3 reports David Hutchison will flesh out these Schlumberger exit ideas.